For many Americans, Social Security benefits are an essential component of retirement planning since they offer a reliable source of income in later life. Your financial security may be greatly impacted by making the most of these advantages.
KEYPOINTS:
- A few crucial tactics can help retirees increase their Social Security benefits.
- When you reach full retirement age (FRA), wait to retire.
- If you wait to apply until you’re 70 years old, you’ll receive the maximum.
- Make sure you don’t exceed the earned-income restrictions if you work and receive benefits, as this will lower your payments.
The following are some tips to increase your Social Security check:
Postpone Making Benefit Claims
Delaying your claim is one of the best strategies to boost your Social Security payments. Even though you can begin collecting benefits as early as age 62, claiming benefits prior to reaching your full retirement age (FRA) will result in a decrease in your monthly benefit amount. Your birth year determines your FRA, which for most persons reaching retirement age ranges from 66 to 67.
Your benefits increase by about 8% annually for each year you wait to claim benefits after your FRA until you are 70 years old. This implies that you may receive up to 24% extra each month if your FRA is 67 and you wait to file until you are 70.
Work More Hours to Get Paid More
Benefits from Social Security are computed using your top 35 years of earnings. Zeros are incorporated into the computation if you haven’t worked for 35 years, which might drastically reduce the number of benefits you receive. Working longer will increase your average monthly wages and, as a result, your benefit amount by substituting higher-earning years for lower-earning ones.
Also, you can get more rewards if you regularly make more money. To improve your Social Security check, try to make the most of your income, particularly in the years before retirement.
Think About Spousal Benefits
You may be qualified for survivor or spousal benefits if you are widowed, divorced, or both. These benefits may be up to 100% of your deceased spouse’s benefit or up to 50% of your spouse’s whole retirement payout. To ensure you fully understand your eligibility and the process for claiming these benefits, consulting a divorce attorney can provide valuable guidance, especially if your marriage lasted for ten years or more.
Based on your ex-spouse’s employment history and your current single status, you may qualify for benefits if you were married for a minimum of ten years. You can optimise your household’s Social Security income by carefully coordinating spousal benefits, such as having one spouse claim benefits early while the other delays.
Cut Down on Benefits Taxes
Federal income taxes may apply to up to 85% of your Social Security benefits, depending on your income. You should carefully manage your sources of income to reduce the amount of taxes on your benefits. Among the strategies are:
- Roth Conversions: Before you begin receiving Social Security payments, convert your regular IRA or 401(k) funds to a Roth IRA. Since Roth IRA withdrawals are tax-free, they may lower your taxable income.
- Tax-Efficient Withdrawals: To reduce your total taxable income, take withdrawals from taxable accounts or Roth IRAs rather than traditional IRAs or 401(k)s.
- Managing Your Investment Income: Adapt your income from investments to remain in lower tax brackets.
Make Use of a Limited Application
You may still be able to use a limited application if you were born before January 2, 1954. As a result, you can start receiving spousal benefits at your FRA and continue to receive benefits until you turn 70. Your lifetime rewards can be greatly increased by using this method.
Examine the Effects of Working While Making a Claim
Your payments may be temporarily lowered based on your wages if you claim benefits prior to your FRA and carry on working. In 2024, if you earn more than $21,240 but are under your FRA, $1 will be withheld from your benefits. $1 will be subtracted in the year you meet your FRA for each $3 you make over $56,520, but only up until the month you reach FRA. Once you reach FRA, there is no penalty for working and receiving benefits.
Make Cost-of-Living Adjustments Known (COLA)
COLAs are used to yearly modify Social Security benefits for inflation. Even while you don’t have much control over these changes, knowing how they operate might improve the way you organise your retirement savings. By guaranteeing that your benefits keep their purchasing value over time, COLAs act as a kind of inflation insurance.
In summary
A thorough understanding of the system and cautious planning are necessary to maximise your Social Security payments. You can increase the amount you receive from Social stability and improve your retirement financial stability by deferring benefits, working longer, taking into account spousal benefits, lowering taxes, and using clever claiming strategies. Speak with a financial advisor to create a customised plan that supports your overall retirement objectives.
